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13. ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the public company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the Chief Executive Officer.
The Company is organized into two reportable operating segments. The “Lifeboat Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators primarily in the United States and Canada. The “TechXtend” segment is a value-added reseller of software, hardware and services for corporations, government organizations and academic institutions in the United States and Canada.
As permitted by ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada with the domestic segments as the Canadian operations provide the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources.
Segment income is based on segment revenue less the applicable segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to an individual segment business unit. The Company only identifies accounts receivable and inventory by segment as shown below as “Selected Assets”; it does not allocate its other assets, including capital expenditures by segment.
The following segment reporting information of the Company is provided (in thousands):
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Nine months ended
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Three months ended
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September 30,
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September 30,
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Revenue:
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2012
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2011
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2012
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2011
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Lifeboat Distribution
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$
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158,838
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$
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137,621
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$
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55,989
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$
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49,118
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TechXtend
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52,772
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38,330
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19,545
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14,623
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211,610
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175,951
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75,534
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63,741
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Gross Profit:
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Lifeboat Distribution
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$
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11,336
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$
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11,817
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$
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3,707
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$
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4,105
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TechXtend
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5,519
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$
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4,366
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1,991
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1,652
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16,855
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16,183
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5,698
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5,757
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Direct Costs:
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Lifeboat Distribution
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$
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3,310
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$
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3,403
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$
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1,071
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$
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1,135
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TechXtend
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2,547
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2,192
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866
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732
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5,857
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5,595
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1,937
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1,867
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Segment Income:
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Lifeboat Distribution
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$
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8,026
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$
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8,414
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$
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2,636
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$
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2,970
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TechXtend
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2,972
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2,174
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1,125
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920
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Segment Income
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10,998
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10,588
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3,761
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3,890
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Corporate general and administrative expenses
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$
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5,291
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$
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5,040
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$
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1,674
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$
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1,598
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Interest income, net
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394
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264
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140
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92
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Foreign currency translation gain
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13
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1
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12
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—
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Income before taxes
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$
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6,114
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$
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5,813
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$
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2,239
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$
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2,384
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Selected Assets By Segment:
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Lifeboat Distribution
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$
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27,367
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TechXtend
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33,375
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Corporate assets
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17,404
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Segment Selected Assets
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$
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78,146
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